Professional Liability Insurance: Frequently Asked Questions
With the currently evolving business landscape, companies offering professional services are constantly exposed to risks. Whether cyberattacks or claims of negligence, you must look out for it all. Professional Liability Insurance saves the day by providing crucial protection, helping businesses manage threats and remain operational if something goes wrong.
Here’s a detailed FAQ to help you better understand Professional Liability Insurance, who needs it, and how it can protect your business.
What is Professional Liability Insurance?
Also known as Errors & Omissions or E&O Insurance, Professional Liability Insurance protects businesses and professionals against any possible claims of negligence, mistakes, or failure to deliver services as promised. It is crucial for companies that provide professional advice or expertise.
What types of professionals typically need this insurance?
Covering a wide variety of industries, Professional Liability Insurance is typically ideal for:
- Accountants and financial advisors
- Lawyers and legal consultants
- Engineers and architects
- Healthcare providers (including long-term care, occupational therapy, and medispas)
- IT consultants and software developers
- Marketing and creative professionals
How does Professional Liability Insurance protect my business?
Professional Liability Insurance is readily available to cover legal fees, settlements, and damages, especially if a client sues you for:
- Negligence or errors in your professional work
- Failure to meet professional standards
- Misrepresentation or breach of contract
- Inaccurate advice or missed deadlines
You are also provided with support and legal defense to avoid business disruption.
What is Cyber & Privacy Liability Insurance, and why is it so important now?
Businesses store sensitive customer information, which means your business is at a high risk of cyberattacks. Just a single breach can wipe out all that data, expose confidential information, and halt operations – sometimes permanently. Cyber & Privacy Liability Insurance covers damages caused by data breaches, ransomware attacks, and other cybersecurity threats. Cyber coverage also often includes risk mitigation services that can help prevent attacks before they happen.
Does my general liability policy include cyber protection?
The answer is: not necessarily. Most business owners assume that their general liability or business owner’s policy would include cyber coverage. However, cyber-related endorsements typically only offer very limited protection. Whereas a dedicated Cyber & Privacy Liability policy offers broader coverage and better support.
What are other important types of Professional Liability coverage?
Other than E&O and Cyber Insurance, you may want to consider these policies:
- Employment Practices Liability (EPL) protects against claims of wrongful termination, harassment, and discrimination.
- Directors & Officers (D&O) Insurance protects business leadership against legal claims related to mismanagement or breach of fiduciary duty.
How did the COVID-19 pandemic impact the Professional Liability market?
With everyone shifting to remote work during the pandemic, new vulnerabilities were created. This led to a surge in cyber incidents and a rise in Cyber Insurance premiums. However, it also encouraged the insurers to develop strong risk mitigation services. Now, prices are stabilizing, and coverage options are improving.
What can I do to reduce my risk beyond buying insurance?
While insurance covers you financially, it cannot erase the damage done to your reputation. This is why it is important to focus more on prevention after securing protection. This can include:
- Working with a knowledgeable insurance agent
- Conducting regular cybersecurity assessments
- Focus more on employee training and implement strong access controls
- Choose carriers known for responsive claims handling and comprehensive coverage
If you’re a professional service provider, Professional Liability Insurance isn’t just an option, but a necessity. With a surge in threats, it’s crucial to evaluate your risks and ensure you have the right protection in place. Work with a trusted insurance professional who would help you build the policy that is adequate for your business.
